R1bn VBS investment: Embattled Prasa denies imminent deal, admits to proposal

Prasa. (Duncan Alfreds, News24)
Prasa. (Duncan Alfreds, News24)

Cape Town - The troubled Passenger Rail Agency of South Africa (Prasa) rejected a media report claiming it is on course to invest R1bn in the bank that granted a loan to President Jacob Zuma relating to the Nkandla scandal.

VBS Mutal Bank, which helped Zuma to repay about R7.8m to the state that was used for non-security upgrades to his Nkandla homestead in KwaZulu-Natal, is reportedly set for a cash injection despite it not meeting Prasa's investment requirements, the Sunday Times reported.

According to correspondence seen by the weekly newspaper, commitment for the deal which has a return of 8.25% per annum, has been confirmed by Prasa’s former acting CEO Lindikhaya Zide.

R500m payment

The payment apparently was set to be made in two tranches, with R500m being set for Friday February 2, 2018.

The Sunday Times also quoted a source from VBS emphasising that it is a "pure investment" deal and has nothing to do with corruption or Zuma.

Prasa on Sunday described as unfounded the claim that it would imminently pay VBS, but it did confirm that a proposal was on the table.

"The Interim Prasa board and the acting group CEO are on record as not having approved nor signed off on the VBS proposal and have not placed Prasa in a binding commitment to the VBS proposal," it said in a statement.

'Call account investments'

Prasa explained that it has call account investments with all the major banks in South Africa.

"The proposal by VBS or any other banks is within common practice. Prasa is governed by the Prasa investment policy which is a guide on transactions of a similar nature."

Money used in the current investments by Prasa with all five major banks in South Africa comes from "surplus monies" that may be available for "short periods of time due to delays or postponement of some capital projects", it said.

"This money is then invested in call accounts for short periods of time as a measure to ensure Prasa’s ongoing liquidity and can be accessed to fund any unforeseen capital shortfalls that may occur at any given time.

"In the final consideration of any investment, Prasa must be guaranteed capital preservation of public funds and the immediate availability of funds should they be needed."

Follow due process

Prasa must ensure that investments comply with National Treasury regulations and the Public Finance Management Act (PFMA). This means that any business proposal, including by VBS must follow due process before any formal deal can be made.

"Currently, Prasa is in the process of analysing the VBS proposal in order to approach the National Treasury officially to ensure compliance by VBS."

"It is important therefore for Prasa to emphasise that no payment instruction has been made either by the board of Prasa or the acting group CEO in this regard. In addition, there is no set deadline to which Prasa must adhere to in regards to the yet to be approved VBS proposal. Most importantly, the authorisation of such payments does not reside with either the chairperson of the board nor the acting group CEO."

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